Viewpoint

Sunshine and showers for Europe’s airlines

The mixed fortunes of Europe’s carriers continued to be highlighted this week as a raft of financial results saw both profits and losses posted in the region.

At one end of the scale you had German carrier airberlin, one of Europe’s least profitable airlines, which confirmed a net loss of €210.1m ($235m) for Q1 2015 on yesterday (May 12).

This result was slightly worse than the previous year’s loss with CEO Stefan Pichler commenting that the airline remained “at the beginning of a long road to recovery”.

Airberlin’s results typify those of European legacy carriers operating in a market beset by overcapacity and facing the added competition of the expanding Middle Eastern carriers.

It wasn’t all doom and gloom, however, with easyJet halting its succession of losses during the winter months by turning a record £7m ($11m) profit for the six months up to March 31, 2015.

Low-cost carriers (LCCs) have been one of European aviation’s bright spots in the past few years, with carriers, such as Ryanair and easyJet, consistently turning annual profits and winning out on short- and medium-haul routes at the expense of larger airlines.

Competition from LCCs is another factor making life difficult for airlines like airberlin, which is certainly not alone in feeling the pinch.

Lufthansa, and its subsidiaries  Austrian Airlines and SWISS, confirmed quarterly losses this month – with falling oil prices only seeing these shortfalls narrow rather than reverse.

Air France-KLM, meanwhile, has also seen its Q1 losses shrink year on year, but following full year results for 2014 which saw it losses increase to €377m ($458m), the group confirmed this week that the French government has paid between up to €45.9m ($51.6m) to increase its share in the airline to 17.6 per cent.

This move will, according to Air France-KLM, give the group a stable, long-term shareholder base as part of its strategy to return to profitability. But this isn’t likely to materialise quickly.

Since a strong 2013, which renewed hopes of Europe’s established carriers returning to profitability, failed to deliver long-term change, the continent is left looking on enviously as North American airlines post record profits having learned the lessons of consolidation and capacity discipline.

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